Gap closure, Bounced off Moving Average, Stochastics down --> $1380 profits
5 min Emini Nasdaq 100
Hi,
Market gapped up today and the morning session was largely non-directional... price was ranging and there didn't seem to be much activity in the market.. Price seemed to be closing the gap but everytime it comes down a little, it somehow bounces back up.. I couldn't tell where it was heading to and there were no signals for a short entry..
I had to wait all the way till 14:30 when price bounced off the moving averages with a sharp turn in stochastics down from the overbought region.. I decided to short 1 contract at 2113 which had very good risk/ reward potential. I placed my stop loss just above 2116.. Price went my way a little but movements were slowly and I started to doubt my decision of entering the market at all...
However, when price broke below the support line formed by the earlier sessions, I shorted another 2 more contracts.. This time price seemed to be closing the gap... I held my position all the way till the gap closed and went beyond... I exited at 2080 when stochastics turned up with profits of $1380.
Fundamentals:
The Federal Reserve on Wednesday announced a novel approach to injecting money into the banking system as it struggles to combat a severe credit crunch that threatens to drag the country into a recession.
The announcement helped dispel the sour mood on Wall Street, where investors had pushed the Dow Jones industrial average down by 294 points on Tuesday out of disappointment with what was seen as a timid interest rate cut. After Wednesday's announcement, stocks recouped a part of the previous day's losses.
The Fed said it would conduct two auctions next week where banks can bid for up to $40 billion in loans, money that they will have to bolster their own reserves. It marked the Fed's biggest concentrated effort to inject liquidity into the banking system since the Sept. 11, 2001, terrorist attacks.
The hope is that the extra funds will spur increased lending on the part of the banks and combat a serious credit crunch that has made loans harder to obtain for many businesses and consumers.